Palladium prices have been moving in a steady downtrend for almost half a year now. The prices fell from an October 4 high of 2356 to a low of 1330.6 on March 9, which is a 43.5% drop in value. However, the dynamics changed over the last week, the prices rebounded by almost 13% from the local lows. A serious bid was made yesterday to break the downward trendline. So far, there is no certainty that this breakdown won't be false, but it's definitely the best attempt to break the trendline in recent months.
Just like other precious metals, palladium saw a surge in investor demand after the SVB failure. Although palladium, as opposed to gold, is not a classic safe-haven asset, market participants were willing to buy almost anything that could somehow protect their savings from the consequences of the U.S. financial sector problems.
The U.S. banking turmoil caused the market to expect that the Fed will now be forced to slow down or even stop the cycle of monetary policy tightening. This is good news for precious metals markets, as the U.S. dollar begins to weaken amid expectations of lower rates, and the value of assets denominated in USD increases, as well as an interest among investors and traders.
News of ongoing problems in the South African mining sector may provide additional support to palladium prices. The January 2023 data shows a decline of another 1.9% in production, with an output of platinum group metals falling by as much as 15.2% year-on-year. South Africa is the world's second largest producer of palladium after Russia, so mining problems in this country may significantly affect the metal's prices.
The magnitude of palladium price drop over the last months is so great that it hasn't yet reached even the first important target in its growth — the level of 1570. A breakdown the downward trendline can only be confirmed after this level is reached.
Consider the following trading strategy option:
Buy palladium in the range of 1470-1500. Take profit – 1570. Stop loss – 1440.
This content is for informational purposes only and is not intended to be investing advice.
